Jerry, in fairness, Senator Grassley and Congressman Frank are competing in slightly different leagues. Barney is pure Robespierrian terror: He wants to guillotine hapless bankers and CEOs because he can, and because he figures the mob would enjoy it.
Senator Grassley, on the other hand, thinks these guys should be falling on their swords — or, to bring it closer to home, retiring to their studies with a tumbler of Scotch and a loaded revolver. Sorry, hari-kiri only works in cultures with a sense of honor or shame. Why should some hotshot exec kill himself just because his bonus made the papers? Barney Frank, Maxine Waters, Dodd, Rangel et al aren’t itching to fall on their swords. Nor are Geithner and Daschle. Sure, if you’re an AIG veep, it’s an embarrassment for a few days while the media blowhards are denouncing you and hunting for snaps of your last Caribbean retreat. But why be the only shmuck in town?
Grassley, entirely by accident, gets to the heart of this: You can’t expect moral codes to operate in a society without moral hazard. Now we’re being told the federal government has to pick up the tab not just for Henrietta Hughes’s house and GM’s unsustainable benefits and California’s runaway budget but also for “older investors” seduced by Madoff’s promises of soaraway returns. Why should AIG bonuses be exempt from a federal cash-cow predicated on rewarding failure? As long as there’s one last feedstore clerk somewhere in Idaho putting in an honest day’s work we can all stick it to, who cares?
If Senator Grassley expects moral behavior in the present environment, he’s a fool. But that’s the point: No matter how many gazillions of dollars you pump in as you frantically try to re-inflate a burst bubble, until moral consequences are restored, the market will not correct.